By: Eli Segall, Las Vegas Review Journal, July 2017

The state Supreme Court on Thursday issued two rulings bolstering homeowners associations’ ability to sell houses through foreclosure.

Nevada’s highest court unanimously ruled that a 2014 decision upholding HOAs’ ability to foreclose ahead of mortgage lenders can be retroactively applied to foreclosures that took place before that ruling.

Separately, the seven-member panel also unanimously reversed a Clark County District Court’s decision to dismiss a lawsuit by a homebuyer who acquired a property through an HOA foreclosure and sued to wipe out the prior owners’ and lender’s rights to the house.

Collectively, the decisions appear to only boost HOAs’ ability in Nevada to seize homes from owners who fell behind on their association dues and to auction off the properties, at times for a relative pittance.

The retroactive-ruling case centered on a two-story home on Glimmering Sun Avenue in the Mountain’s Edge community of Las Vegas.

The house sold for about $315,800 in 2007, and the Tuscalante Homeowners Association sold it at auction for $40,000 in 2013, property and court records show. A division of Wilmington Savings Fund Society, a Delaware bank that held the mortgage, later sued the buyer in federal court.

The lender claimed the sale to K&P Homes occurred without the bank receiving notice and was “invalid” and “unlawful.” When the house was auctioned, more than $278,000 was still owed on the mortgage, the lawsuit alleged.

The Nevada Supreme Court addressed the question of whether the 2014 HOA ruling could be applied retroactively.

The ruling, which involved a home in Southern Highlands where the HOA foreclosed before the mortgage lender, did not create a new law or overrule existing precedent, but rather declared what a law “has required” since its inception, Justice Ron Parraguirre wrote.

The other case decided Thursday centered on a two-story house on Beach Falls Court in the northwest valley.

The house sold for $175,000 in 2008, with the buyers using a mortgage insured by the Federal Housing Administration, according to property and court records. In 2014, the Desert Creek Homeowners Association sold the house through foreclosure for $20,000.

A few weeks later, the buyer, Kenneth Renfroe, filed a lawsuit seeking a court order to declare him the rightful owner and to wipe out the prior owners’ and lender’s rights to the house.

The lawsuit was dismissed. Renfroe appealed, and the Supreme Court reversed the decision.

The primary issue was whether state law was pre-empted by federal law when a mortgage is FHA-insured. But the pre-emption doctrine “does not apply in these circumstances” because the FHA insurance program “specifically contemplates” that lenders may be subject to higher-priority liens, Justice Lidia Stiglich wrote.